Working Paper

Title: When to Ally and When to Acquire: Expansion Strategies of Multinational Firms in China

Reference Number: 1118

Publication Date: March 2005

JEL Classifcation:

Author(s):

Yigang PanYork University

Zhigang TaoThe University of Hong Kong

Jiangyong LuHK Institute of Economics and Business Strategy

Abstract:

Most companies do not compare acquisition and alliance before picking one, and often end up with the "wrong" thing (Dyer, Kale, and Singh, 2004). Even though academic literature does compare acquisitions and alliances, there exist inconsistent explanations and findings. In this study, we reexamine the choice of multinational firms in partial-ownership acquisitions and start-ups (joint ventures) when they expand into an emerging economy, China. Drawing upon the existing literature, we examine the influence of product relatedness, competitive rivalry, task-specific knowledge, and location-specific knowledge. Our sample consists of 2,152 partial acquisitions and start-ups in China in 257 product sectors from 23 countries between 1985 and 2001. Our findings offer new insights on partial ownership international expansion strategies.